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The platform built by the anonymous founder can only come out of nowhere to challenge industry leaders in cryptocurrencies only. All in a few weeks.
That’s exactly what happened with the launch of the NFT Marketplace. Looks rareOver $ 9 billion in January volume, High seas..What’s more, LooksRare was created within 30 days of launch Protocol revenue is $ 307 million, while OpenSea is $ 110 million In the same period.
Raw numbers aren’t perfect, but …
In this issue of Around The Block, we’ll cover the LooksRare vampire attack on the industry-leading NFT marketplace OpenSea.
OG Vampire Attack
Vampire attacks are purely crypto / Web3 phenomena. At the highest level, a vampire attack is a way to lure users from an existing platform to a competing platform by providing some sort of incentive (usually a token).
The The most notorious vampire attack It happened in 2020 when Sushi Swap launched a decentralized exchange that was about the same as the industry-leading Uniswap, with one important difference. In other words, users who migrated liquidity from Uniswap to Sushiswap were given $ SUSHI tokens. $ SUSHI has provided holders with governance rights to the platform, in addition to reducing transaction fees collected by SushiSwap.
result?Uniswap liquidity surged temporarily as users moved $ 1.2 billion Fund Sushiswap to monetize the excellent incentives offered. Uniswap eventually recovered and responded with its own token activation, but the new DEX was bootstrapped in a relatively short period of time.
Looks rare vampire attack
LookRare followed a typical vampire attack playbook, including:
- Identify industry leaders
- Build a competitive but strategically differentiated platform
- Providing great incentives for migrating users
The main difference between the SushiSwap and LooksRare attacks is that SushiSwap is almost the same copy of Uniswap’s code (called a fork) and has token incentives built on it. LookRare seems to have built its own smart contract ( document); Everything else in the playbook is the same:
- Identify industry leaders. In this case, it’s OpenSea, a mile away.
- Build a competing but differentiated platform. lookrare.org..
- It provides a great incentive for users to migrate. $ LOOKS token.
$ LOOK at the first incentive
Due to the open source nature of the blockchain, the LooksRare team was able to identify OpenSea users who have traded at least 3 ETH worth of NFTs in the last 6 months. Airdrop They look for tokens. However, in order to claim these free tokens, the user had to first list the NFT on the LooksRare exchange.
As NFTs flooded new markets, airdropping tokens into the existing community of active NFT traders proved effective. LOOKS tokens will rise to nearly $ 7 in just 10 days after launch, with a market capitalization of $ 1 billion in the process.
And the incentives didn’t stop there …
MOAR incentive
Beyond the initial airdrop, users of the LooksRare platform can earn more tokens by betting LOOKS and trading NFTs on the platform. LookRare charges a 2% fee per sale (2.5% on OpenSea), and staking (locking LOOKS to smart contracts) allows stackers to receive 100% of those fees. Stakers also earn additional looks in addition to transaction fees.
At the time of writing, staking LOOKS will give you a stunning 500% or more APR.
Trading incentives are where things start to get interesting. It’s very easy. Buy or sell NFTs at LooksRare and earn LOOKS. Rewards are paid daily based on the percentage of volume for the day. Currently, 2.8 million looks, or just under US $ 10 million at the current price, are awarded daily.
So far, free airdrops have been enough to take people to the platform, and a daily reward of $ 10 million has been enough to maintain daily trading volumes above OpenSea. However, looking at the total number of users per day, it’s clear that these volumes aren’t as impressive as they were first displayed.
Wash trade
One day, LooksRare doubles the volume of OpenSea, but OpenSea has 20-40 times more active users than LooksRare. This suggests that the volume of LooksRare is supported by a small number of traders playing incentive systems to win LOOKS.
There is nothing to prevent users from exchanging the same NFT between their wallets at a high price. Daily rewards are paid as% of the volume of the day, so if someone can buy and sell clothes up to 10% of the volume of the day, you can earn $ 1 million in LOOKS.
The problem here is that for every transaction, the user has to pay a 2% ETH-priced fee. Math works The fees paid by traders on ETH are about the same as the rewards paid on LOOKS. Therefore, traders are basically exchanging ETH for LOOKS. This will be rewarded if the price of LOOKS is higher than the price of ETH.
Basically, if the LooksRare platform is successful, early adopters will be rewarded, so an interesting game theory is running.
Beyond clothes transactions
At this point, no one would argue that the extraordinary volume of LooksRare is the result of their favorable incentive scheme. However, LooksRare are all hats and do not necessarily mean that there are no cows.
Cryptoslam at the end of January Estimated Of the $ 9 billion in January volume, about $ 8 billion was wash trading. However, the remaining legitimate NFT volumes still exceed the amount done by the NFT marketplaces Rarible, SuperRare, Foundation, Makersplace, and Aysnc. 2021 all together..
The launch of LooksRare can still be considered a success, even if wash trading is eliminated. In addition, it offers other interesting and innovative features such as no transaction fees for individual sales and the ability to make a single offer across the NFT collection.Finally, their “real volume” is Continue to grow..
Is it sustainable?
LookRare’s transaction fees will decline over the next two years, at which point the market will have to compete solely on its products and the community. It’s up to the anonymous team behind it to continue to grow market share without strong incentives.
Take a look at Sushi Swap, the predecessor to attack vampires, to get a glimpse of what the future holds. Sushi Swap by many means is still relevant after the initial reward is exhausted. They continue to innovate, spanning multiple chains, and today’s TVL is close to $ 5 billion.
However, I didn’t use Uniswap. Uniswap eventually launched its own token (there’s speculation that OpenSea might one day do the same), maintaining its position as the dominant DEX for cryptography over $ 7.5 billion in today’s TVL. increase. Also, controversial hard forks (Bitcoin Cash, Ethereum Classic, etc.) and vampire attackers (SushiSwap, Swerve, etc.) have never replaced existing companies.
Sushiswap has been successful, but it also accounts for a significant proportion of the hardships. Community internal conflict Several prominent team members, including the project CTO, have been sent off between the core team and Sushi token holders. When LookRare hands over governance to LOOKS holders, it can be reminded that it is messy in the early stages. DAO governance Really so.
Finally, for LooksRare users, it should be mentioned that anonymous teams always carry the risk of lag pull.Besides, LooksRare smart contracts have been launched Unaudited Traders should be aware that there is no public GitHub repository.
